Emerging markets hedge funds managed a record $154.9 billion as of Q2 2013, as they navigated a challenging EM environment that included weak equity market performance and slowing economic growth.

According to the latest HFR Emerging Markets Hedge Fund Industry Report, EM hedge funds have now seen four consecutive quarters of asset growth,

Investors allocated $1.79 billion in new capital to EM hedge funds in Q2, nearly matching the $1.82 billion inflow from the first quarter and bringing EM inflows to $6.6 billion in the trailing three quarters.

All main strategies experienced inflows, led by equity hedge strategies which attracted $1.5 billion in net new capital.

Regional inflows were led by emerging Asia, which received $734 million. Latin American funds received $339 million, funds focused on the Middle East received $181 million and those focused on Russia/Eastern Europe experienced a small outflow of $110 million.

“In contrast to the recent economic improvement in developed markets, the Emerging Markets investment environment has deteriorated and become more challenging, with EM hedge funds effectively posting impressive gains, negatively correlated to the recent declines in both EM equities and currencies,” stated Kenneth J. Heinz, president of HFR.

“The combination of variables, including expectations for tapering of U.S. bond purchases, continued social and secular unrest across Egypt and Syria, and policy action to reduce the sharp declines in the Indian rupee and South African rand suggests continued EM asset volatility in coming quarters. Through this environment, EM hedge funds continue to be well positioned to insulate investors from currency, commodity, equity and sovereign fixed income weakness and to tactically position for opportunities created by fluid political and economic developments, with these contributing to continued growth of EM assets in 2H13.”

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We are accustomed to splitting trading into technical and fundamental buckets. Both involve crunching data; one set includes market fundamentals and the other pure price data. Alternative data is a third bucket that is gaining traction.